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Oct. 4 --A federal
district court could not exercise subject matter jurisdiction in a trademark
case between Trader Joe's and a Canadian grocery that was buying and reselling
Trader Joe's products, which are otherwise not available in Canada, the U.S.
District Court for the Western District of Washington ruled Oct. 2 (Trader
Joe's Co. v. Hallatt, W.D. Wash., No. 2:13-cv-00768-MJP, 10/2/13).

Granting a motion to dismiss for lack of subject matter jurisdiction, the
court said that there was no basis for extraterritorial application of the
Lanham Act in this case.

Trader Joe's Has No Locations Outside U.S.

Trader Joe's Co.
of Monrovia, Calif., founded in 1967, operates a national chain of grocery
stores. The company has no locations outside the United States, but credit card
transactions show that the Bellingham, Wash., location gets 40 percent of its
business from Canadian shoppers. Trader Joe's holds several U.S. trademark
registrations on the term “Trader Joe's.” It has applied to register two
trademarks in Canada.

Michael Norman Hallatt is a citizen of Canada and
he also holds legal permanent resident status in the United States. He is the
principal of Pirate
Joe's a/k/a Transilvania Trading Co. of Vancouver, which operates a grocery
originally called “Transilvania Trading.” At some point he began to take
requests from his customers for Trader Joe's products and changed his name to
Pirate Joe's, crossing the border to purchase Trader Joe's goods at retail
prices and resell them in Canada.

(1) the defendant's action creates some effect on
American foreign commerce, (2) the effect is sufficiently great to present a
cognizable injury to plaintiff under the Lanham Act, and (3) “the interests of
and links to American foreign commerce [are] sufficiently strong in relation to
those of other nations to justify an assertion of extraterritorial
authority.”

First, the court determined that
Trader Joe's had failed to establish any cognizable injury under the Lanham Act.
In prior cases, such injury was found in circumstances when a plaintiff itself
engaged in international commerce or when the allegedly infringing activity had
taken place partly within the United States.

The court in Love v.
Associated Newspapers, Ltd., 611 F.3d 601, 95 U.S.P.Q. 2d 1855 (9th Cir.
2010), rejected extraterritorial application to allegedly infringing compact
discs made in Germany. The argument that the existence of infringing CDs abroad
was harming sales of live concert tickets in the United States was found to be
too attenuated.

“Here, all alleged infringement takes place in Canada and
Trader Joe's cannot show economic harm. Even if Canadian consumers are confused
and believe they are shopping at Trader Joe's or an approved affiliate when
shopping at Pirate Joe's, there is no economic harm to Trader Joe's because the
products were purchased at Trader Joe's at retail price,” the court said. “Like
in Love, any 'goodwill' related harm is too tenuous to support a
cognizable Lanham Act claim when all infringing conduct is abroad.”

The
court rejected an exercise of jurisdiction based on the argument that Pirate
Joe's operations would interfere with Canadians crossing the border into the
United States to shop at Trader Joe's themselves.

“Trader Joe's has not
cited, and this Court has not found, circumstances where the Lanham Act was
applied to alleged infringement happening entirely abroad on the grounds foreign
customers will buy the infringing product in their home country and not cross
into the United States to purchase the legitimate product here,” the court
said.

The court concluded that there was no showing that Pirate Joe's
actions affected American commerce or created any cognizable injury for which
Trader Joe's could seek remedies under American trademark law.

Analyzing the third factor of the Timberlane
test “involves the balancing of seven relevant factors: The degree of conflict
with foreign law or policy, the nationality or allegiance of the parties and the
locations or principal places of business of corporations, the extent to which
enforcement by either state can be expected to achieve compliance, the relative
significance of effects on the United States as compared with those elsewhere,
the extent to which there is explicit purpose to harm or affect American
commerce, the foreseeability of such effect, and the relative importance to the
violations charged of conduct within the United States as compared with conduct
abroad.”

The sole factor that the court found
weighing in favor of extraterritorial jurisdiction was the one related to
Hallatt's status as a legal permanent resident of the United States and his
frequent trips to the United States to engage in commercial activity.

The
factor addressing whether there was any explicit purpose to harm or affect
American commerce was found to be neutral by the court. On the one hand, it was
clear that Pirate Joe's was intentionally buying goods in the United States and
selling them in Canada. However, the court said, it was not clear that there was
any intent to harm, particularly because Hallett paid retail price.

The
remaining factors all weighed against extraterritorial jurisdiction, according
to the court. Thus, the court concluded that it did not have subject matter
jurisdiction in this matter. However, the court gave Trader Joe's leave to amend
its complaint with additional facts that might be relevant to the question of
diversity jurisdiction with respect to claims under Washington state law.

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